Mitchell’s laws: Reduced money growth never stimulates economic growth. To survive long term, a monetarily non-sovereign government must have a positive balance of payments. Austerity breeds austerity and leads to civil disorder. Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
I haven’t bothered to read the New York Times in months, only because they print exactly the same economic tripe as my hometown paper, the Chicago Tribune. So what would be the purpose? But on the lottery-scale chance things had changed, I decided to give them another peek. After all, they are one of the world’s great newspapers, aren’t they?
Here is what I found.
The Gridlock Where Debts Meet Politics
By David Leonhardt, November 5, 2011, NY Times
WASHINGTON — With Greece struggling to form a government that can force harsh austerity measures onto a weary public, Europe is in usual form, taking a couple of steps toward solving its fiscal crisis and then a couple of steps backward. Washington, meanwhile, is hoping that the latest deficit-reduction committee in Congress can succeed where others have failed.
Of course, if the deficit-reduction committee “succeeds” in cutting the deficit, America will have a fiscal crisis identical with that of Europe’s, perhaps worse.
This cycle of bureaucracy and gridlock has been repeating itself for months now. It is tempting to blame feckless politicians on both sides of the Atlantic, and that would not be entirely wrong.
But the frailty of politicians is not the full story. The fact is that most of the industrialized world — Europe, the United States, Japan, too — is in a difficult economic bind. There are no simple solutions that would quickly win the approval of citizens if only politicians were willing to try them.
The author, David Leonhardt, clearly does not understand the differences between Monetarily Sovereign nations (United States, Japan, some of Europe) and monetarily non-sovereign nations (the euro countries). So he just lumps them together as though they had similar problems.
And no simple solutions? Really? How about these:
1. Monetarily sovereign nations increase deficit spending
2. Euro nations either leave the euro, or the EU give (not lend) euros to its member nations, as needed.
That simple enough for you, Mr. Leonhardt?
Most voters in these places have yet to come to grips with the notion that they have promised themselves benefits that, at current tax rates, they cannot afford. Their economies have been growing too slowly, for too long, to pay for the coming bulge of retirees.
True for monetarily non-sovereign nations; completely untrue for Monetarily Sovereign nations, which do not use taxes to pay for benefits. Nor do economies pay for retirees, if Mr. Leonhard is referring to programs like Social Security.
“The U.S. and Europe have to make hard choices because of two things: slower growth and aging populations,” said Barry Eichengreen, an economist at the University of California, Berkeley. “Europe’s choices are even harder than America’s, because the prospects for growth are more dubious.”
The problems of Europe’s monetarily non-sovereign nations are completely different from the problems of Europe’s Monetarily Sovereign nations. Mr. Leonhardt doesn’t understand that. Talking about “Europe’s choices” simply makes no sense.
Europe still has not set aside enough money to cover its debts, with Italy now presenting the most immediate problems, many economists say. In the United States, a special Congressional deficit committee appears to be making little progress, and some members of Congress have even begun talking about undoing the automatic Pentagon cuts set to take place if the committee deadlocks.
Same problem. He writes about economics, but has no clue about the differences between MS and monetary non-sovereignty. So, he has no clue about economics. The UK doesn’t need to “set aside” money, though Spain does. If Mr. Leonhardt were a sportswriter, he might say, “The problem with the Chicago Bears and the Chicago Cubs is they don’t get on base enough.”
On the most basic level, affluent countries are facing sharply increasing claims on their resources even as those resources are growing less quickly than they once were. The increasing claims come from the aging of the population, while the slowing growth of available resources comes from a slowdown of economic expansion over the last generation.
Pure gobbledegook. What “resources and what “claims” is he talking about?
“These are very difficult moral issues,” said Benjamin an, an economic historian at Harvard. “We are really talking about the level at which we support the elderly retired population.”
If there is a university that combines more hubris with less knowledge of economics than Harvard, I’d like to know what . . . oh, wait . . . The University of Chicago is right up there. Anyway, does the government of the greatest nation on earth – a nation with the unlimited ability to pay any bill of any size, really have a “difficult”moral issue, in deciding whether to support its elderly? This is a difficult issue?
In the United States, the debates center on whether to let government grow as the population ages and whether the affluent, who have done very well in recent decades, should pay more taxes. In Europe, the issues revolve around whether to shrink government, which is bigger than it is here, and whether well-off northern countries like Germany should support poorer countries, like Greece and Italy, which also suffer from fiscal irresponsibility.
Yup. Sadly, those are the debates, only because the economists and the media put their hands over their ears and scream, “I can’t hear you. I can’t hear you.” whenever anyone mentions Monetary Sovereignty.
Everywhere, though, the debate is about much more than just partisan advantage or the next election. It is a philosophical debate.
Yah, right. It’s a philosophical debate – about who will win the next election.
Polls, however, suggest that there is little political advantage in explaining the reality of future budget math. “Everybody thinks, ‘My taxes are going to fund somebody else’s social programs,’ ” Mr. Eichengreen said, “making people even more resistant to solutions.”
In other words, the pols think the voters are too stupid to understand the facts, so why even bother? Just keep feeding them bullsh*t, and hope to win next November. Who cares about reality or the future of America.
An article in the current issue of The National Interest, named this problem the “no-growth trap.”
In the short term, this trap takes the form of resistance to emergency measures, like Germany’s distaste at bailing out more profligate countries, which may increase deficits. “The central paradox of financial crises,” Timothy F. Geithner, the Treasury secretary, said before leaving for the Group of 20 meetings in Europe last week, “is that what feels just and fair is the opposite of what’s required for a just and fair outcome.”
No, the central paradox is those people who have been given the power to solve the problem don’t understand Monetary Sovereignty, so they have no solutions.
Longer term, the trap is created by resistance to the higher taxes and reduced benefits necessary to return countries to financial stability. The resistance is understandable, given how weak income growth has been in the past decade, but it is not sustainable.
The voters are smarter than their leaders. The voters know higher taxes and reduced benefits will not “return countries to financial stability,” unless one considers a depression and the death of a nation to be financial stability.
In the months since I last visited the New York Times, nothing has changed – still printing the abject ignorance about our economy – still mouthing the same, old, popular economic wisdom that went obsolete on August 15, 1971.
It’s been more than 40 years. Isn’t that enough time for the vaunted New York Times to catch up?
One dunce cap for Mr. Leonhardt
(This brings us to a 1065 cap deficit. I doubt a cap tax will bring me to cap stability.)
Rodger Malcolm Mitchell
No nation can tax itself into prosperity, nor grow without money growth. Monetary Sovereignty: Cutting federal deficits to grow the economy is like applying leeches to cure anemia. The key equation in economics: Federal Deficits – Net Imports = Net Private Savings